New Down Payment Rules Are at Heart of Mortgage Debate

Down Payment Rules Are at Heart of Mortgage Debate

It seemed an easy fix to prevent the excesses of the housing market: make home buyers put more money down.

But as the housing market starts to return and the subprime mess fades from memory, the issue is up for debate.

Lenders and consumer advocates — rarely on the same side of the issue — are now cautioning against down payment requirements. They argue that such restrictions could limit lending, and prevent lower-income borrowers from buying homes. They also contend that the new mortgage rules put in place this year will do enough to limit foreclosures, making down payment requirements somewhat superfluous.

The arguments seem to run contrary to long-standing beliefs about homeownership. For decades, experts have emphasized the need for a sizable down payment — a rule of thumb being 20 percent — on the premise that borrowers with a sizable chunk of equity in a home are less likely to walk away when things get bad.

“If our goal is to prevent foreclosures, I can’t think of anything more effective than requiring a down payment,” said Paul S. Willen, a senior economist and policy adviser at the Federal Reserve Bank of Boston.

Comments

We had 30% down——220,000. We lost that $220,000 and our remaining life savings of $100,00 by trying to keep up the payments after I became permanently disabled & on Medicare and SSDI. We informed the bank, when we had 1 1/2 years before we ran out of savings—asking for a modification. 4 1/2 years later, runaround, no answers, chasing people at the bank, declaring Bankruptcy–ch. 7. No more money— lost my health, our home, our lives’ savings, our sanity. BUT THE BANK SHORTSALED THE HOME FOR MORE MANY THEN WE OWED AT THE TIME THAT WE NO LONGER COULD PAY !!!!! If they had modified 4 years earlier, we would still have everything. Instead, some other ass has our home for $200,000 less and the home. Why didn’t SUNTRUST MTG. just agree to remold iffy at the appropriate rate which allowed us affordability??????

This issue has nothing really to do with down payment!!!!! It is the selfish and idiotic banks, starting with the OCC AND THE FED RESERVE.

WE HOPE ELIZABETH WARREN, SENATOR nails all of those white collared criminals. Independent foreclosure review a joke$2,000! The Fed Reserve & OCC couldn’t even place us in the correct payable category….violation of foreclosure collections during BK.

I AM DISGUSTED AFTER WORKING 27 years, disabled and losing it all. The banks & regulators are not accounts ble. I have written proof. I filed official complaints– the Fed Reserve responded with info available on its website. They did not answer my questions. And the OCC —- laughable sent me a letter stating that they are not involved in the INDEPENDENT FORECLOSURE REVIEW. At this point We contacted our Senators and Senator’s Warren office
To file a complaint , since she heads the committee in Congress questioning in hearings the possible fraud & failure of the IFR.

Did have a down payment of 20%. That didn’t stop my mortgage broker, at the time, from selling me a crappy stated-income false inflated 1% teaser rate Option-Arm. That didn’t get the DOJ to go after it either.
If our goal was really to prevent foreclosures, then they should of gone after the loan origination a long long time ago.

Indeed Yvonne. It’s just a scapegoat. It’s always just that. We are all just talking in cicles. We can’t afford correct representation so unless free help is given by people that know, it will always just be another thing to blame on the ones who walk away with the least, as in negative.

Uh, excuse me Paul, but people HAD DOWN PAYMENTS they still lost their homes because it was the paperwork that failed to have incentives; and they lost their down payments so it doesn’t matter if someone has money in the beginning or not – if the underlying documents are false – one could put down 90% and still lose . . . focus on the falsity of the paperwork and fraudulently shielded transactions for where the strengths and weaknesses lay in home ownership. Furthermore, what about the non-monetary down payments . . sweat equity, improvements, developing neighborhoods, establishing human communities, these are priceless down payments; where people did not have cash flow they made up in civic investments . . .

How about ensuring the ability of borrowers to pay back the loans? Naw, the Banksters are already counting on another wave of profitable victims. They can’t make profits any other way. Paul Willen is paid not to think of “any other ways”. Thus, the FIRE sector is hopelessly sociopathic, you see the same horrible afflictions in any society that is slowly falling to pieces, it’s not about housing, it’s about makin’ money. Makin’ money supercedes every other consideration – human rights, human dignitiy, health care, civil liberties. Look, they don’t care if you are in the street. Protect the Banksters!

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